By breaking down physical barriers, consumer internet businesses are reshaping how people shop, connect, learn, and play. This influence cuts both ways though because they have high exposure to the ups and downs of consumer spending, and the market seems to believe the tide is turning in the wrong direction - over the past six months, the industry has tumbled by 16.6%. This drop is a stark contrast from the S&P 500’s 7.9% gain.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here are two internet stocks boasting durable advantages and one we’re steering clear of.
One Consumer Internet Stock to Sell:
eBay (EBAY)
Market Cap: $48.01 billion
Originally known as the first online auction site, eBay (NASDAQ: EBAY) is one of the world’s largest online marketplaces.
Why Are We Hesitant About EBAY?
- White space opportunities may be dwindling as its growth in active buyers averaged a weak 1.3%
- Anticipated sales growth of 5.7% for the next year implies demand will be shaky
- Day-to-day expenses have swelled relative to revenue over the last few years as its EBITDA margin fell by 7.4 percentage points
eBay’s stock price of $107.75 implies a valuation ratio of 13.9x forward EV/EBITDA. Dive into our free research report to see why there are better opportunities than EBAY.
Two Consumer Internet Stocks to Watch:
Meta (META)
Market Cap: $1.52 trillion
Famously founded by Mark Zuckerberg in his Harvard dorm, Meta Platforms (NASDAQ: META) operates a collection of the largest social networks in the world - Facebook, Instagram, WhatsApp, and Messenger, along with its metaverse focused Reality Labs.
Why Is META a Good Business?
- 29.6% annual increases in its average revenue per user over the last two years show its platform is resonating with power users
- Excellent EBITDA margin of 61.8% highlights the efficiency of its business model, and its rise over the last few years was fueled by some leverage on its fixed costs
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 56% exceeded its revenue gains over the last three years
Meta is trading at $599.36 per share, or 10.4x forward EV/EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
LegalZoom (LZ)
Market Cap: $1.05 billion
Founded by famous lawyer Robert Shapiro, LegalZoom (NASDAQ: LZ) offers online legal services and documentation assistance for individuals and businesses.
Why Are We Fans of LZ?
- Has the opportunity to boost monetization through new features and premium offerings as its subscription units have grown by 11.6% annually over the last two years
- Switching costs of its platform were on full display over the last two years as it not only grew engagement but also increased the average revenue per user by 35.2% annually
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 31.2% exceeded its revenue gains over the last three years
At $6.16 per share, LegalZoom trades at 4.5x forward EV/EBITDA. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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